Aurelia Butler

Speaking at a Wall Street Journal event, McConnell said: “We don’t have a president who is likely to nominate somebody for the Fed that would be my first choice and I’m probably going to end up supporting Powell.”The central bank chief’s nomination must be confirmed by the Senate, which is split 50-50 between Democrats and Republicans, with Vice President Kamala Harris casting the tie-breaking vote. President Joe Biden nominated Powell last month, citing his “steady leadership” that calmed panicked markets and his belief in monetary policies that support maximum employment. More

LONDON (Reuters) -Financial markets, which have struggled this year to decipher central bankers’ policy signals, face their biggest challenge yet in December when in the space of 24 hours the Federal Reserve, ECB and Bank of England hold crucial meetings.These come at the end of a year that saw central banks generate frequent bouts of market turmoil, the most recent examples being the BoE’s shock “no change” decision on Nov. 5, October’s timid rate-hike pushback by the European Central Bank and the Reserve Bank of Australia’s failure to defend its bond yield target. It is unsurprising then that a week or so before 2021’s final crop of meetings, measures of asset price volatility are shooting higher, with currency and bond vol gauges hitting the highest in months. First up on Dec. 15, the Fed’s 1800 GMT statement may announce faster tapering of asset-purchases and could reveal its thinking on future rate rises. The next day, the BoE meets, having in November kept rates on hold — at odds with market pricing.Less than an hour later, the European Central Bank could announce plans for two key bond-buying programmes; implications could be big for highly indebted states like Italy.Monetary policy messaging, by its very nature, is an inexact business. But unexpectedly sticky inflation, supply-chain threats to economic recovery and COVID’s constant background menace now make the outcomes especially hard to model.”Whether it’s Madame Lagarde or Andrew Bailey or Jay Powell, the current circumstances are creating almost a perfect storm of challenge to central bank communication,” said Carl Tannenbaum, Northern Trust (NASDAQ:NTRS) chief economist who worked at the Fed’s risk section during the 2008 financial crisis.He hopes the meetings will yield a “much more candid and fulsome discussion” especially on labour markets and inflation. Investors express sympathy for central bankers whose job walking the communication tightrope has been complicated further in recent years by markets’ huge clout, far greater than what the previous crop of central bankers had to contend with.Global equities’ value is approaching $100 trillion, almost double pre-pandemic levels; government spending splurges have expanded bond markets. Trading at exalted valuations, the potential for setbacks is huge.And the signalling impact resonates well beyond markets — so confident were British banks in a November rate hike, they had moved home loan costs higher before the BoE meeting.What central bankers need to convey is straightforward — that they will provide necessary support in the short-run and price stability in the long-run. But in pumped-up markets, where sentiment turns on a dime, it’s harder than it looks. It may prompt a rethink of signalling strategies; the BOE’s Bailey for instance even suggested returning to a no-guidance stance.Richard Barwell, a former BoE economist who heads macro research at BNP Paribas (OTC:BNPQY) Asset Management, says central banks would like to preserve the policy-tightening option but without committing to it.”The challenge is to make the necessary change – and create that option – without destabilising markets by convincing them that the option is certain to be exercised,” he said.  UNRELIABLE BOYFRIENDSBarwell said any bank proceeding with December policy tightening would need to explain the decision in light of the Omicron COVID variant. But the risk then is of markets pricing out future rate rises. That’s especially a problem for BoE Governor Bailey, who according to Barwell, has a “Grand old Duke of York” problem, a reference to the English nursery rhyme describing a futile action.”There may be a limit to the number of times policymakers can march the market up to the top of the rate hike hill only to march it back down again,” he added.The UK media quickly dubbed Bailey “Unreliable Boyfriend No. 2”, updating a moniker applied to predecessor Mark Carney, whose policy signals sometimes failed to translate into action. ECB chief Christine Lagarde too was criticized after her half-hearted rejection of rate rises priced for 2022 in late October boosted the euro and hurt bonds. But the moves reversed the following week when she forcefully rebutted rate hikes.The Fed’s Jerome Powell seems to have garnered top marks, not least for his willingness to admit he didn’t have all the answers. But even his calm wavered recently; days after telling lawmakers Omicron could imperil economic recovery, he suggested it may be time to stop seeing inflation as transitory. The dollar which had weakened, shot straight up again.But Timothy Graf, State Street (NYSE:STT)’s head of EMEA macro strategy, praised Powell for his “honesty and forthrightness”, drawing parallels with the candour of ex-ECB chief Mario Draghi, credited with steering the euro zone from its 2011-2012 crisis.”The Fed is making a course correction from what was perceived earlier in the year, rightly or wrongly, as having a somewhat relaxed approach to the inflation question,” Graf said. More

“Domestically we are seeing huge demand when borders open,” he said at a CAPA Centre for aviation event. “We have seen a surge in 24 hours in the Queensland market alone.”Queensland on Monday brought forward the opening of its domestic borders to Dec. 13, from a previous estimate of Dec. 17.Low-cost offshoot Jetstar should reach 120% of pre-COVID domestic capacity by April, while the premium Qantas brand should reach 115%, Joyce said.He said the airline remained on track to decide by the end of the year on a preferred supplier for more than 100 planes to replace its ageing domestic fleet.In the international market, it will take far longer to recover to pre-COVID levels, though Qantas will bring back some of its A380 super-jumbo planes for flights from Sydney to London and New York from next July.Joyce said that although some decline in international business travel was expected, his airline relied on leisure travellers for 60% of premium revenue, large companies for 20% and small and medium businesses for 20%. More

BENGALURU (Reuters) – The rise in U.S. house prices will slow to half its double-digit rate next year but still outstrip increases in consumer prices and wages, according to a Reuters poll of property analysts, who said affordability would worsen over the next two to three years.Often viewed as the bedrock of financial wellbeing and consumer confidence, the U.S. housing market has not only weathered the pandemic-induced economic slowdown, it has outperformed the broader economy.Ultra-low interest rates and initial pandemic-related demand for more spacious accommodation to allow for home offices has pushed up property prices at a blistering pace.The S&P Case-Shiller index of 20 metropolitan areas has risen at a double-digit rate over the past 10 months, a pace the Nov. 17-Dec.6 poll of over 25 property analysts said would continue for the rest of the year to average at 16.8%.That was expected to drop to 8.0% in 2022, according to the poll. Forecasts were in a 3-15% range.”Overall housing demand remains strong, but there have been quite a few developments that have raised some red flags about the overall health of the housing market,” said Mark Vitner, senior economist at Wells Fargo (NYSE:WFC). “We look for sales and new home construction to moderate in 2023, as the bulk of pent-up demand is likely to have been met by then. Price appreciation is also expected to moderate.” (GRAPHIC: Reuters poll graphic on the U.S. housing market outlook – https://fingfx.thomsonreuters.com/gfx/polling/dwpkrzaxzvm/U.S.%20housing%20graphic.png) Underscoring the strong demand for housing, U.S. existing home sales, which make up about 90% of U.S. home sales, were forecast to average at an over six million unit annualized rate until end 2022 at least.However, higher consumer inflation and the U.S. Federal Reserve’s recent overtures to tighten monetary policy earlier than expected are likely to rein in the pace at which prices have risen over the past year. A lack of new supply, which has squeezed many new home buyers out of the market, will also remain a major challenge next year. Inventory levels are only about one-third of what is considered healthy.When asked what will have the biggest impact on the U.S. housing market next year, all but one of the 27 analysts who answered an additional question chose either supply constraints (14) or higher interest rates (12).”It’s all about supply. Reduction in supply of new home construction will lead to home prices rising above people’s income growth and lead to widening wealth inequality,” said Lawrence Yun, chief economist at the National Association of Realtors.That supply squeeze, which has a direct bearing on affordability, was not expected to ease any time soon.A near-80% majority of analysts, 22 of 28, who answered an additional question, expected housing affordability to worsen over the next two to three years.”Affordability is becoming a very serious concern. Many people are going to get priced out of purchasing a home, and more will be forced to rent,” said Brad Hunter at Hunter Housing Economics, a consultancy.”A lot of millennials are already turning to renting detached single-family homes. They are having kids now, so they need that house in the suburbs with a yard, parks nearby, other kids in the neighborhood, and good suburban schools.”(For other stories from the Reuters quarterly housing market polls:) More

Longer waits and higher prices have been a normal part of buying a new car this year as a result of a global shortage of semiconductors and supply disruptions.There are early signs that this shortage is now easing as inventories at leading suppliers rise. But a fundamental change in the industry that produces the semiconductors that go into today’s cars means that it is too early to say that the worst is over.The more lasting problem lies in the evolution of most global automotive chip companies into “fabless” firms — they design chips and then outsource manufacturing (or fabrication). As these companies do not have their own production facilities, they are reliant on chipmakers such as Taiwan Semiconductor Manufacturing Company and Samsung.These two companies, which account for around 80 per cent of the world’s contract chip making and nearly all of the advanced chip manufacturing market share, have long run at full capacity. Automaker chip inventories are at historic lows, meaning demand should remain high.Meanwhile, modern cars use more chips than ever. Electronic systems control everything from opening the boot to cutting edge infotainment systems. Additional autonomous driving features are pushing up the number of chips in a car. The average electric car uses about 2,000 chips, double the average petrol one. The Tesla Model 3, for example, has more than triple the number of electronic components compared to its traditional counterpart. Tesla’s Full Self-Driving Chip, its central control unit made by Samsung and found in its all new models, is a key part of its technological edge over rival electric carmakers. Until now, most of the automotive sector’s chips have used older technology. That means automakers were not fighting other sectors like smartphones and telecom for the same chips. But as cars become increasingly high tech, carmakers are starting to use the advanced chips used in smartphones, internet servers and 5G equipment. As smarter, more autonomous cars become a more common sight on roads, many times more advanced chips will be needed.Despite demand, chipmakers such as Samsung and TSMC are reluctant to expand production capacity. Costs are high. Samsung’s new Texas plant, for example, will cost $17bn. It will take years to build and recoup investment. Chip prices are negotiated once a year, making it difficult to increase pricing amid fast changing market conditions. The fat, 40 per cent margins at TSMC and Samsung’s chip units are contingent on running at full capacity using existing plants. Automotive chips are also not the chipmaker’s favourite. They are difficult to design and manufacture, needing to pass tough stress tests to ensure safety as any defects can mean car accidents. It takes around five years to design and produce them from scratch, compared with less than a year for chips used for consumer electronics. The complexity is compounded by the fact that cars now need a mix of both older and high-end chips. There is also little leeway in chip pricing due to automakers’ slim operating profit margins.As a large chunk of Samsung’s production capacity goes into its own products, TSMC is the only viable choice for most companies seeking advanced chips. But TSMC is already overwhelmed with a 53 per cent share of the contract chip manufacturing market share. There are concerns too of possible disruption and political risk after Chinese warplanes made a record number of incursions near Taiwan this year.Shares of Samsung are down 16 per cent from a January high despite record revenues. This partly reflects expectations that periods of oversupply may push down prices and profits after record years such as this one. During chip supply gluts in 2001 and 2008, Samsung group operating margins fell to single digits.But future downturns are likely to become less predictable. The world has felt the uncomfortable consequences of chip disruption and has no intention of a rerun. Car companies are stockpiling. Omicron-driven border closures are adding to an already tight supply situation.Carmakers with local supply chains will gain an edge. Tesla’s recent move to Austin, for example, puts it just a half-hour drive from Samsung’s new chip plant in Taylor. That should result in a reduction in supply chain issues, quicker updates and more engineering collaboration. Automakers that rely on just-in-time manufacturing and global suppliers for low component costs need an overhaul. Management decisions made in the coming year are going to determine market share in five years’ [email protected] More

WASHINGTON (Reuters) -The U.S. aviation industry said on Monday new precautionary measures offered by AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) were insufficient to address air safety concerns raised by the planned use of C-Band spectrum for 5G wireless.The Aerospace Industries Association said in a letter to Federal Communications Commission chair Jessica Rosenworcel that the telecom plans “are inadequate and far too narrow to ensure the safety and economic vitality of the aviation industry.” The industry and the Federal Aviation Administration (FAA) have raised concerns about potential interference of 5G with sensitive aircraft electronics like radio altimeters.The FCC, FAA and Verizon did not immediately comment. AT&T declined comment.On Friday, an aviation coalition including major airlines and airplane manufacturers met with the White House and other agencies and presented the National Economic Council with a proposal for additional safeguards.The letter said the aviation proposal “provides additional safeguards in, around, and on the approach to airports and heliports.”The FAA is expected as soon as Tuesday to issue two airworthiness directives highlighting safety issues that may arise from 5G interference.Final instructions to airlines about potential impacts and ways to comply are not expected until later when the FAA issues notices that will take into account AT&T and Verizon mitigation efforts. AT&T and Verizon said on Nov. 24 they had committed for six months to take “additional steps to minimize energy coming from 5G base stations – both nationwide and to an even greater degree around public airports and heliports.”AT&T and Verizon in November agreed to delay commercial launch of C-band wireless service until Jan. 5 after the FAA issued a Nov. 2 bulletin warning action may be needed to address the potential interference.Wireless groups argue that there have been no C-Band aviation safety issues in other countries using the spectrum. More